Ninth Circuit Strikes Class Arb Waivers

By John Alan Doran

The Ninth Circuit Court of Appeals weighed in, today, on the propriety of class action arbitration waivers under the NLRA.  The Court held that such waivers violate Sections 7 and 8 of the NLRA in the context of a pending FLSA lawsuit.

Ernst & Young requires new employees to sign an agreement that requires employees to pursue any claims against the employer through arbitration, and such arbitrations must be pursued on an individual basis.  The effect of the agreement is to prevent employees from bringing class or collective actions against the employer in court or in arbitration.  But, the employees involved in this case brought a FLSA collective action lawsuit anyway.  The employer moved to dismiss the lawsuit arguing that all of the potential class members had to arbitrate their respective claims separately as individuals.  The trial court agreed, dismissed the case, and ordered individual arbitrations.

The Ninth Circuit reversed, however, finding that the arbitration provision violates Section 7 of the NLRA, which grants employees a statutory right to engage in “concerted” activities.  The Court poo-pooed the import and impact of the Federal Arbitration Act, the stated purpose of which is to promote and enforce arbitration agreements.  This is no surprise, as the Ninth Circuit has quite notoriously fought arbitration at every avenue when it comes to employment litigation.  The dissenting judge in this case quite rightly describes the Court’s decision as “breathtaking in its scope and in its error”.  Given the profound split on this issue between federal appellate courts, the continued vitality of this decision rests with SCOTUS, yet another point of significant interest in this election cycle.